Lightspeed Venture Partnershttp://www.businessinsider.com/category/lightspeed-venture-partners
en-usTue, 31 Mar 2015 16:53:52 -0400Tue, 31 Mar 2015 16:53:52 -0400The latest news on Lightspeed Venture Partners from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/how-lightspeeds-jeremy-liew-invests-in-startups-like-snapchat-2013-12How Snapchat's First Investor Found Snapchat Before Anyone Elsehttp://www.businessinsider.com/how-lightspeeds-jeremy-liew-invests-in-startups-like-snapchat-2013-12
Sat, 14 Dec 2013 09:00:35 -0500Alyson Shontell
<p><img style="float:right;" src="http://static5.businessinsider.com/image/529f7ffb6bb3f78a2e58f3fc-800-600/jeremy-2.jpg" border="0" alt="jeremy liew lightspeed" /></p><p>It's a good thing Jeremy Liew met Barack Obama.</p>
<p><span style="font-size: 15px; line-height: 1.5em;">In March 2012, Liew's Facebook profile picture was of himself and the President. He didn't know it at the time, but that picture would help him land a crucial early stage investment.</span></p>
<p>Liew is a partner at <a href="http://lsvp.com/">Lightspeed Venture Partners</a>, a firm with $2 billion under management. There are nine partners who lead startup deals in the United States. Only Liew and one other partner, Justin Caldbeck, hunt for startups in the crowded consumer technology space. And in March 2012, Liew had his eye on an app called Snapchat.&nbsp;</p>
<p><span style="font-size: 15px; line-height: 1.5em;">When Liew first found Snapchat, the disappearing photo app had fewer than 100,000 installs. Liew's partner had seen it on his teenage daughter's phone. She told her father there were only three apps high school kids were using: Angry Birds, Instagram, and Snapchat. Liew was familiar with the first two. But he had never heard of Snapchat.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">The comment was enough to pique Liew's curiosity. He made it his mission to find out who was behind the mysterious app.</span></p>
<p>Liew did a Google search and came up dry. No articles had been written about Snapchat. There was no contact information on the startup's website except for a generic email address. Liew messaged it and heard nothing back. Liew looked up the company on LinkedIn and sent a message. Again, there was no response.&nbsp;</p>
<p><span style="font-size: 15px; line-height: 1.5em;">Determined, Liew did a WhoIs lookup on the domain name, Snapchat.com. It had been registered by Toyopa Group, the former parent company of Snapchat. Spiegel had named it after the street his father lived on, Toyopa Drive.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"></span><span style="font-size: 15px; line-height: 1.5em;">Liew did a Google search for Toyopa Group and found Evan Spiegel's name. He was a student at Stanford, where Liew had also gone to school. Liew was able to message him on Facebook through the Stanford alumni network.</span></p>
<p>When Liew sent the Facebook message, Spiegel finally replied. He wasn't looking to raise a round of financing; Liew was fine with that. Liew invited Spiegel to meet him at his office on the most famous street in the entrepreneurial world, Sand Hill Road in Menlo Park. &nbsp;A few feet to the left sits Greylock Partners, Sequoia Capital and Institutional Venture Partners. To the right sits Khosla Ventures.</p>
<p><img class="float_left" src="http://static2.businessinsider.com/image/52a39ab669beddc6193afefc-640-480/photo-164.jpg" border="0" alt="lightspeed sand hill road" />During the meeting, Spiegel shared his vision for Snapchat. Facebook is a place where you can share superficial feelings with the world. It's for sharing times when you're happy, confident, and enjoying life. But what about all the other times when you're sad, feeling crazy or even depressed?</p>
<p>Spiegel felt there should be a place where intimate feelings could be expressed privately via fleeting messages. &nbsp;After all, true friendships are formed when people share both positive and negative experiences. And negative experiences can't be housed on a public, identifying platform like Facebook.</p>
<p>Spiegel's app hadn't been downloaded many times, but engagement metrics were strong. "People were using it like crazy and staying for a really long time," Liew recalls.</p>
<p>Eventually, Spiegel let Lightspeed invest in his company. It was the only investor in a $485,000 seed round, which Spiegel raised in May 2012. He was still three classes shy of graduating. Snapchat has since raised more than $120 million and it turned down a multi-billion-dollar acquisition offer from Facebook.</p>
<p>Liew later asked Spiegel why he returned the Facebook request and none of his other messages.</p>
<p>"It was because you had President Obama in your profile picture," Spiegel said.&nbsp;</p>
<p><strong>"There's serendipity involved in all this stuff,"</strong> Liew said, recalling that conversation.</p>
<p>But Liew's investments are based on much more skill than luck.&nbsp;<span style="font-size: 15px; line-height: 1.5em;">His name is frequently mentioned in the Los Angeles startup scene, where a number of his early investments are panning out.</span></p>
<p>Whisper is another social app Liew found before other investors. Based in Santa Monica, Whisper lets users anonymously share secrets in a safe, supportive environment, like an open-source diary. Liew saw Whisper trending in the App Store and it fit his firm's investment thesis.</p>
<p>Liew emailed its founder, 26-year-old Michael Heyward, on a Monday. He said he'd be in town for a board meeting that Tuesday. By Wednesday, Liew convinced Heyward to meet with his partner. On Friday, Liew sent Heyward &mdash; who hadn't been interested in raising a round of financing &mdash; a term sheet. On Saturday, Liew flew back to Santa Monica and finalize the investment in Whisper. Lightspeed led its $3 million Series A round of &nbsp;financing.&nbsp;</p>
<p>Whisper now has millions of registered users. It has 80-times more content than there are Wikipedia pages. It has raised $25 million.</p>
<p>Liew also found ShoeDazzle, a once-buzzy startup run by Kim Kardashian and Brian Lee, early. Like Spiegel, Lee wasn't interested in meeting him. Lee told Liew that ShoeDazzle was profitable, so it didn't need venture capital.&nbsp;</p>
<p><span>"Eventually, I flew [uninvited] to LA and said, 'Hey, I'm here,'" Liew says.</span></p>
<p><span></span>Lee agreed to meet Liew for coffee. After months of leaning in, Lee let Lightspeed invest in ShoeDazzle.</p>
<p><img style="float:right;" src="http://static1.businessinsider.com/image/52a39783eab8ea99633aff0b-800-600/jeremyobama.jpg" border="0" alt="jeremy liew obama" />Liew's partner, Justin Caldbeck, is equally persistent. Caldbeck recently invested in a consumer startup that ignored his initial emails. Instead of taking "no" for an answer, Caldbeck showed up on the startup's doorstep with a plate full of cupcakes.</p>
<p>In addition to being persistent, Caldbeck and Liew are observant. If his partner hadn't been an engaged father, Liew might have missed Snapchat. With ShoeDazzle, Liew noticed a friend collecting pink boxes of shoes. He asked her what all the boxes were about; she told him they were Kim Kardashian's shoe-of-the-month club.</p>
<p><span style="font-size: 15px; line-height: 1.5em;">Liew and Caldbeck try to think differently about their investments. So while other VCs are looking right, they turn their heads a little to the left. &nbsp;</span></p>
<p>"When everyone is saying, 'We don't invest in this,' that's sometimes a good time to invest," says Liew. "You have to find a reason the conventional wisdom no longer applies."</p>
<p>Liew used the recent craze around e-commerce startups and the rise of Facebook's platform as an example.</p>
<p>"E-commerce startups shouldn't work," Liew says. "They don't have brand-names and they don't have scale, so their cost to acquire customers should be much higher and their lifetime value much lower than incumbents. The only time it makes sense to invest in e-commerce startups is when there's a new customer acquisition channel that's scalable. Startups are nimble enough to take advantage of the opportunity and grow to scale before the incumbents even notice.&nbsp;The first time that happened since Google paid search was when Facebook opened up its right rail to e-commerce companies and advertisers."</p>
<p>Startups like Gilt Groupe, LivingSocial, ShoeDazzle, Groupon, and Ruelala were able to scale their customer bases quickly and cheaply on the coattails of Facebook before larger brands caught on. Now that the Facebook channel is saturated with brands like Nordstrom and JC Penney, e-commerce startups can't rely on it for growth.</p>
<p>"Before Zulily, there hadn't been a $1 billion exit in e-commerce in 10&ndash;12 years," says Liew. "[Investors] who were saying, 'We don't invest in e-commerce startups' didn't realize something (Facebook's emergence as a cheap customer acquisition channel) had changed."</p>
<p>Snapchat and Whisper seem like obvious investments now. But when Lightspeed invested, most people assumed social startups had peaked. Facebook won the space, especially after it purchased Instagram. Instead of writing off social startups altogether, Liew's team tried to find entrepreneurs who were innovating in places where Facebook couldn't follow.</p>
<p class="p1"><span style="font-size: 15px; line-height: 1.5em;">Facebook, Liew determined, is the journal of record for our real lives. By its nature, it needs to tie users to their real identities. It also aspires to host everything its users publish forever. That creates an opportunity for startups to host temporary content or to thrive on anonymity.</span></p>
<p class="p1">"If you flip Facebook's need for real IDs to anonymous accounts, then you get an app like Whisper," Liew says. "If you flip Facebook's need for permanence to impermanence, you get Snapchat."</p>
<blockquote class="pullquote">If you flip Facebook's need for real IDs to anonymous accounts, then you get an app like Whisper. If you flip Facebook's need for permanence to impermanence, you get Snapchat.</blockquote>
<p>Liew is constantly on the hunt for under-the-radar trends like that. One of his favorite resources is <a href="http://www.pagedatapro.com/">PageData</a>.&nbsp;<span style="font-size: 15px; line-height: 1.5em;">PageData shows which pages are trending on Facebook. While some trend because they're newsworthy (like Paul Walker's page following his sudden death), others hint at investment opportunities.&nbsp;</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"></span><span style="font-size: 15px; line-height: 1.5em;">Last year, Liew noticed pages with memes, or text-and-picture content, were trending. When he saw Whisper and Snapchat, he realized those housed the same type of content. Sites like LOLCats and PerezHilton had been creating that type of content for years; Snapchat and Whisper were bringing the experience to mobile devices.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">Now Liew is noticing publications like Viral Nova and Upworthy, which are driving rapid growth through social sharing. PolicyMic, a media startup that has quickly grown to 8 million monthly readers, is one of Liew's investments.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"></span><span style="font-size: 15px; line-height: 1.5em;">Liew is also interested in Bitcoin startups, as well as startups that are applying big data to financial services.&nbsp;</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">While Liew has invested in all kinds of consumer startups and entrepreneurs, there's something they have in common.&nbsp;</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">"We believed in the vision of each team, as well as the teams themselves," Liew says of his investments. "We were able to reach out to startups like Snapchat and Whisper and get to them quickly. Also, they were outside of the typical investment cycle."</span></p><p><a href="http://www.businessinsider.com/how-lightspeeds-jeremy-liew-invests-in-startups-like-snapchat-2013-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/how-lightspeeds-jeremy-liew-invests-in-startups-like-snapchat-2013-12How Snapchat's First Investor Found Snapchat Before Anyone Elsehttp://www.businessinsider.com/how-lightspeeds-jeremy-liew-invests-in-startups-like-snapchat-2013-12
Sun, 08 Dec 2013 16:19:00 -0500Alyson Shontell
<p><img style="float:right;" src="http://static5.businessinsider.com/image/529f7ffb6bb3f78a2e58f3fc-800-600/jeremy-2.jpg" border="0" alt="jeremy liew lightspeed" /></p><p>It's a good thing Jeremy Liew met Barack Obama.</p>
<p><span style="font-size: 15px; line-height: 1.5em;">In March 2012, Liew's Facebook profile picture was of himself and the President. He didn't know it at the time, but that picture would help him land a crucial early stage investment.</span></p>
<p>Liew is a partner at <a href="http://lsvp.com/">Lightspeed Venture Partners</a>, a firm with $2 billion under management. There are nine partners who lead startup deals in the United States. Only Liew and one other partner, Justin Caldbeck, hunt for startups in the crowded consumer technology space. And in March 2012, Liew had his eye on an app called Snapchat.&nbsp;</p>
<p><span style="font-size: 15px; line-height: 1.5em;">When Liew first found Snapchat, the disappearing photo app had fewer than 100,000 installs. Liew's partner had seen it on his teenage daughter's phone. She told her father there were only three apps high school kids were using: Angry Birds, Instagram, and Snapchat. Liew was familiar with the first two. But he had never heard of Snapchat.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">The comment was enough to pique Liew's curiosity. He made it his mission to find out who was behind the mysterious app.</span></p>
<p>Liew did a Google search and came up dry. No articles had been written about Snapchat. There was no contact information on the startup's website except for a generic email address. Liew messaged it and heard nothing back. Liew looked up the company on LinkedIn and sent a message. Again, there was no response.&nbsp;</p>
<p><span style="font-size: 15px; line-height: 1.5em;">Determined, Liew did a WhoIs lookup on the domain name, Snapchat.com. It had been registered by Toyopa Group, the former parent company of Snapchat. Spiegel had named it after the street his father lived on, Toyopa Drive.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"></span><span style="font-size: 15px; line-height: 1.5em;">Liew did a Google search for Toyopa Group and found Evan Spiegel's name. He was a student at Stanford, where Liew had also gone to school. Liew was able to message him on Facebook through the Stanford alumni network.</span></p>
<p>When Liew sent the Facebook message, Spiegel finally replied. He wasn't looking to raise a round of financing; Liew was fine with that. Liew invited Spiegel to meet him at his office on the most famous street in the entrepreneurial world, Sand Hill Road in Menlo Park. &nbsp;A few feet to the left sits Greylock Partners, Sequoia Capital and Institutional Venture Partners. To the right sits Khosla Ventures.</p>
<p><img class="float_left" src="http://static2.businessinsider.com/image/52a39ab669beddc6193afefc-640-480/photo-164.jpg" border="0" alt="lightspeed sand hill road" />During the meeting, Spiegel shared his vision for Snapchat. Facebook is a place where you can share superficial feelings with the world. It's for sharing times when you're happy, confident, and enjoying life. But what about all the other times when you're sad, feeling crazy or even depressed?</p>
<p>Spiegel felt there should be a place where intimate feelings could be expressed privately via fleeting messages. &nbsp;After all, true friendships are formed when people share both positive and negative experiences. And negative experiences can't be housed on a public, identifying platform like Facebook.</p>
<p>Spiegel's app hadn't been downloaded many times, but engagement metrics were strong. "People were using it like crazy and staying for a really long time," Liew recalls.</p>
<p>Eventually, Spiegel let Lightspeed invest in his company. It was the only investor in a $485,000 seed round, which Spiegel raised in May 2012. He was still three classes shy of graduating. Snapchat has since raised more than $120 million and it turned down a multi-billion-dollar acquisition offer from Facebook.</p>
<p>Liew later asked Spiegel why he returned the Facebook request and none of his other messages.</p>
<p>"It was because you had President Obama in your profile picture," Spiegel said.&nbsp;</p>
<p><strong>"There's serendipity involved in all this stuff,"</strong> Liew said, recalling that conversation.</p>
<p>But Liew's investments are based on much more skill than luck.&nbsp;<span style="font-size: 15px; line-height: 1.5em;">His name is frequently mentioned in the Los Angeles startup scene, where a number of his early investments are panning out.</span></p>
<p>Whisper is another social app Liew found before other investors. Based in Santa Monica, Whisper lets users anonymously share secrets in a safe, supportive environment, like an open-source diary. Liew saw Whisper trending in the App Store and it fit his firm's investment thesis.</p>
<p>Liew emailed its founder, 26-year-old Michael Heyward, on a Monday. He said he'd be in town for a board meeting that Tuesday. By Wednesday, Liew convinced Heyward to meet with his partner. On Friday, Liew sent Heyward &mdash; who hadn't been interested in raising a round of financing &mdash; a term sheet. On Saturday, Liew flew back to Santa Monica and finalize the investment in Whisper. Lightspeed led its $3 million Series A round of &nbsp;financing.&nbsp;</p>
<p>Whisper now has millions of registered users. It has 80-times more content than there are Wikipedia pages. It has raised $25 million.</p>
<p>Liew also found ShoeDazzle, a once-buzzy startup run by Kim Kardashian and Brian Lee, early. Like Spiegel, Lee wasn't interested in meeting him. Lee told Liew that ShoeDazzle was profitable, so it didn't need venture capital.&nbsp;</p>
<p><span>"Eventually, I flew [uninvited] to LA and said, 'Hey, I'm here,'" Liew says.</span></p>
<p><span></span>Lee agreed to meet Liew for coffee. After months of leaning in, Lee let Lightspeed invest in ShoeDazzle.</p>
<p><img style="float:right;" src="http://static1.businessinsider.com/image/52a39783eab8ea99633aff0b-800-600/jeremyobama.jpg" border="0" alt="jeremy liew obama" />Liew's partner, Justin Caldbeck, is equally persistent. Caldbeck recently invested in a consumer startup that ignored his initial emails. Instead of taking "no" for an answer, Caldbeck showed up on the startup's doorstep with a plate full of cupcakes.</p>
<p>In addition to being persistent, Caldbeck and Liew are observant. If his partner hadn't been an engaged father, Liew might have missed Snapchat. With ShoeDazzle, Liew noticed a friend collecting pink boxes of shoes. He asked her what all the boxes were about; she told him they were Kim Kardashian's shoe-of-the-month club.</p>
<p><span style="font-size: 15px; line-height: 1.5em;">Liew and Caldbeck try to think differently about their investments. So while other VCs are looking right, they turn their heads a little to the left. &nbsp;</span></p>
<p>"When everyone is saying, 'We don't invest in this,' that's sometimes a good time to invest," says Liew. "You have to find a reason the conventional wisdom no longer applies."</p>
<p>Liew used the recent craze around e-commerce startups and the rise of Facebook's platform as an example.</p>
<p>"E-commerce startups shouldn't work," Liew says. "They don't have brand-names and they don't have scale, so their cost to acquire customers should be much higher and their lifetime value much lower than incumbents. The only time it makes sense to invest in e-commerce startups is when there's a new customer acquisition channel that's scalable. Startups are nimble enough to take advantage of the opportunity and grow to scale before the incumbents even notice.&nbsp;The first time that happened since Google paid search was when Facebook opened up its right rail to e-commerce companies and advertisers."</p>
<p>Startups like Gilt Groupe, LivingSocial, ShoeDazzle, Groupon, and Ruelala were able to scale their customer bases quickly and cheaply on the coattails of Facebook before larger brands caught on. Now that the Facebook channel is saturated with brands like Nordstrom and JC Penney, e-commerce startups can't rely on it for growth.</p>
<p>"Before Zulily, there hadn't been a $1 billion exit in e-commerce in 10&ndash;12 years," says Liew. "[Investors] who were saying, 'We don't invest in e-commerce startups' didn't realize something (Facebook's emergence as a cheap customer acquisition channel) had changed."</p>
<p>Snapchat and Whisper seem like obvious investments now. But when Lightspeed invested, most people assumed social startups had peaked. Facebook won the space, especially after it purchased Instagram. Instead of writing off social startups altogether, Liew's team tried to find entrepreneurs who were innovating in places where Facebook couldn't follow.</p>
<p class="p1"><span style="font-size: 15px; line-height: 1.5em;">Facebook, Liew determined, is the journal of record for our real lives. By its nature, it needs to tie users to their real identities. It also aspires to host everything its users publish forever. That creates an opportunity for startups to host temporary content or to thrive on anonymity.</span></p>
<p class="p1">"If you flip Facebook's need for real IDs to anonymous accounts, then you get an app like Whisper," Liew says. "If you flip Facebook's need for permanence to impermanence, you get Snapchat."</p>
<blockquote class="pullquote">If you flip Facebook's need for real IDs to anonymous accounts, then you get an app like Whisper. If you flip Facebook's need for permanence to impermanence, you get Snapchat.</blockquote>
<p>Liew is constantly on the hunt for under-the-radar trends like that. One of his favorite resources is <a href="http://www.pagedatapro.com/">PageData</a>.&nbsp;<span style="font-size: 15px; line-height: 1.5em;">PageData shows which pages are trending on Facebook. While some trend because they're newsworthy (like Paul Walker's page following his sudden death), others hint at investment opportunities.&nbsp;</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"></span><span style="font-size: 15px; line-height: 1.5em;">Last year, Liew noticed pages with memes, or text-and-picture content, were trending. When he saw Whisper and Snapchat, he realized those housed the same type of content. Sites like LOLCats and PerezHilton had been creating that type of content for years; Snapchat and Whisper were bringing the experience to mobile devices.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">Now Liew is noticing publications like Viral Nova and Upworthy, which are driving rapid growth through social sharing. PolicyMic, a media startup that has quickly grown to 8 million monthly readers, is one of Liew's investments.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"></span><span style="font-size: 15px; line-height: 1.5em;">Liew is also interested in Bitcoin startups, as well as startups that are applying big data to financial services.&nbsp;</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">While Liew has invested in all kinds of consumer startups and entrepreneurs, there's something they have in common.&nbsp;</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">"We believed in the vision of each team, as well as the teams themselves," Liew says of his investments. "We were able to reach out to startups like Snapchat and Whisper and get to them quickly. Also, they were outside of the typical investment cycle."</span></p><p><a href="http://www.businessinsider.com/how-lightspeeds-jeremy-liew-invests-in-startups-like-snapchat-2013-12#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/silicon-valley-on-abcs-shark-tank-2012-9A Silicon Valley VC Rates The Pitches On ABC’s Shark Tankhttp://www.businessinsider.com/silicon-valley-on-abcs-shark-tank-2012-9
Wed, 19 Sep 2012 09:47:00 -0400Jeremy Liew
<p><img style="float:right;" src="http://static1.businessinsider.com/image/4b57363000000000002f25d5-400-300/shark-tank-show-abc-website.jpg" border="0" alt="shark tank show ABC website" /></p><p>I&rsquo;ve just started watching&nbsp;<a href="http://abc.go.com/shows/shark-tank" data-bitly-type="bitly_hover_card">Season 4 of Shark Tank</a>, the incredibly popular show on ABC where entrepreneurs pitch their businesses to a panel of five individual investors (the Sharks) for investment. I thought it might be fun to give a VC&rsquo;s perspective on the businesses getting pitched.</p>
<p>You can watch the first episode&nbsp;<a href="http://abc.go.com/watch/shark-tank/SH559076/VD55231381/week-1" data-bitly-type="bitly_hover_card">online</a>, if you didn&rsquo;t see it live, to see the pitches and learn about the businesses. I&rsquo;m going to focus on analysis, and not explain the businesses themselves.</p>
<p><strong>COAT CHEX</strong></p>
<p>The first pitch was for Coat Chex, a company using a tablet app to make coat checks (and other &ldquo;bailment&rdquo; businesses such as valet parking, dry cleaning etc.) simpler and more secure. Looking past the cheesy theatre of the guys pitch, this company was the one most likely to actually pitch a real Silicon Valley VC, given its technology angle.</p>
<p><a href="https://twitter.com/mcuban" data-bitly-type="bitly_hover_card">Mark Cuban</a>&nbsp;was right to describe the pitch as a &ldquo;Horrible! Horrible! Horrible idea!&rdquo;. &nbsp;The company was pitching a franchise business to roll out the technology nationwide, when it had yet to actually run it live in a single location. This is a classic example of focusing on scaling up before product-market fit has been achieved. The founder had not thought about his go to market approach, he had not researched competitors, and he had not done any market testing because it wasn&rsquo;t convenient for him (wrong time of year &ndash; too hot in Indiana, so he didn&rsquo;t bother). This business school student made the classic mistake of mistaking an idea for a product for a business plan. He thought that all be needed to get the investment was to charm and entertain, when what he needed to do was convince.</p>
<p>Despite all of this, Cuban made an offer to invest $200k for 33% of the company. The founder wanted to take the offer, but he called his advisor (his business school professor) who told him it was too much dilution for this stage, so he turned it down. This was the right decision. There is a lot that he can do to address the questions being raised, including building out some locations and operating the service. He had come too early to pitch.</p>
<p>Although the decision was right, the fact that the founder went against his judgment to listen to his advisor, and regretted the outcome later, is a negative sign. Founders need to have the courage of their convictions. They should listen to advisors, of course. But if the advisor doesn&rsquo;t convince them, they need to be leaders, and do what they think is right. This founder isn&rsquo;t ready to be a startup CEO.</p>
<p><strong>BEV BUCKLE</strong></p>
<p>The second pitch was for Bev Buckle, a belt buckle with a fold out bottle holder. The founder had sold $340k worth of the product at 60%+ gross margins at festivals around the country, and had interest (but not purchase orders) from a long list of retailers. He had problems with his manufacturer (poor quality) and working capital and had only 62 items available in inventory. He was seeking $50k and wanted to take a salary in the $2-3k per month range to do this full time. He got three offers:</p>
<ul>
<li>$50K for 75% of the company</li>
<li>$50k for 51% of the company with no salary</li>
<li>$50k for a 12% royalty off the top</li>
</ul>
<p>It is very positive that the founder had generated some sales and interest from retailers. He has shown some hustle, and demonstrated product-market fit.</p>
<p>The issue here is that this is likely to be a bit of a fad product. Now fad products, like the&nbsp;<a href="http://www.theslanket.com/" data-bitly-type="bitly_hover_card">Slanket</a>, can be incredibly profitable, but they don&rsquo;t generate enterprise value. At some point the fad passes and sales will crash. Enterprise value comes from a projection of future continue sales growth, or at least stability, and that is unlikely for this product. Fad products look more like projects than companies, with a defined endpoint to the investor participation. They are often structured as loans which need to be repayed with interest, so that the investor knows that they are getting their money out. That is likely why we saw the offers structured as they were.</p>
<p>Two of the offers would see the founder cede control of the company to the investor. This way the investor knows that they can get their money out because they can control the payment of dividends, and can wind down the company and distribute cash if they determine that there is no future in the company. Founders can get too tied up in the product to see clearly when it is time to wrap up the company and they can waste a lot of money trying to revive a product without a future, or swinging for a new hit product. Since founders can pull salary and other benefits from the company continuing while the investor gets nothing until distribution, an investor would want control over a company likely to have a defined &ldquo;end of life.&rdquo;</p>
<p>The other offer saw money coming off the top as a percentage of revenue. This also protects the investor from a situation when the company should be wound down but isn&rsquo;t. The investor doesn&rsquo;t bear risk on ongoing expenses without the prospect for future revenue.</p>
<p>The company chose to sell 51% of the company and take no salary. I think that was a poor decision. The gross margins of the business can support a 12% royalty and this would be both cheaper in the long run, and allow the founder to keep control.</p>
<p><strong>BODY WALKING INSTITUTE</strong></p>
<p>The third pitch was for a company selling certifications in &ldquo;Body Walking&rdquo; a massage technique that involved using the feet. The pitch was all about potential, market size and math &ldquo;if we just had 10 classes a month with 20 people in those classes, that is a revenue of $300k.&rdquo; The company was not novel, had had very limited success to date (only 30 certifications sold in 7 years) and all the Sharks passed.</p>
<p>As two of the Sharks said, &ldquo;Potential is not sales.&rdquo;</p>
<p><strong>BUGGY BEDS</strong></p>
<p>The last pitch was for Buggy Beds, a company building bed bug glue traps. These guys focused their pitch on the product, and they really hid the lead. They should have led with their tremendous traction with retailers (<a href="http://www.businessinsider.com/blackboard/home-depot" class="hidden_link">Home Depot</a>, Burlington Coat Factory) and direct sales to Housing Authorities that had generated $150k in sales in six months with $100k in profit.</p>
<p>The company asked for $125k for 7% of the company (pre money of $1.66M), having turned down an offer for $5M for the patents and trademarks before they started sales. The founders clearly believed in the upside of the company and that is why they were willing to take a lower valuation but wanted minimal dilution.</p>
<p>All the Sharks were interested in investing. One made an offer of $250k for 25% of the company (pre money of $750k) and offered to let all the other sharks join him in his offer. He was clearly trying to get the Sharks to collude to avoid driving valuation up. Two of the other sharks joined the offer. Another offered $150k for 15% of the company (pre money of $850k &ndash; slightly better) but made it an exploding offer and demanded an immediate response. The founders waited, the exploding offer was withdrawn, and all the rest of the sharks joined in on the group offer. The founders accepted it.</p>
<p>With this level of interest, the entrepreneurs should have known that they had room to negotiate. Entrepreneurs should never take an exploding offer with such a short deadline. It suggests desperation on the part of the investor. They want to force you into a quick decision, likely because they are worried that a higher offer may be made by someone else. But if they want in so badly, they will still come back later on, just as this Shark did.</p>
<p>Similarly, when they see so much interest from so many partners, they should push for better terms. With this much interest, it is likely that at some point the collusion will break down and one investor or more will make a better offer to try to seal the deal for themselves.</p>
<p>The company left money on the table by not countering, or refusing the offer. They could have said &ldquo;we want just one investor, fully committed to helping us build something great, so we have to turn down this offer, but are open to alternatives&rdquo; and let the Sharks fight each other to get into a deal that they all want. Almost always, having one major investor with a lot of skin in the game is better than a &ldquo;party round&rdquo; with lots of people in for a small amount. When the company needs help with a &ldquo;party round&rdquo; no one has enough at stake to do real work to help. Conversely, when a single investor has real money at stake, then they have real upside to help the company grow, and real money at risk if the company is in trouble, so will be there when help is needed.</p>
<p>The other big mistake that the company made was that they should have asked for more money. The company made $100k in profit in six months. Yet they only asked for $150k. What could they do with $250k in capital that they couldn&rsquo;t do with the $100k that they already had? And if they waited another six months, they would have had $200k+ based on their run rate. In order to hit an inflection point, they would likely need an order of magnitude more capital than they currently had available, and should have been asking for $1M or more to build their company to the next level.</p>
<p><strong>WRAP UP</strong></p>
<p>Shark Tank is a fun show, with companies that are very unlike most of the pitches I see as a VC, but where many lessons still apply. I&rsquo;m going to break down the pitches for each episode this season on our blog.</p>
<p><em>Follow us on twitter at&nbsp;<a href="https://twitter.com/lightspeedvp" data-bitly-type="bitly_hover_card">@lightspeedvp.com</a>&nbsp;or subscribe to our blog at&nbsp;<a href="http://lsvp.com/blog/" data-bitly-type="bitly_hover_card">http://lsvp.com/blog/</a></em></p><p><a href="http://www.businessinsider.com/silicon-valley-on-abcs-shark-tank-2012-9#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/how-new-big-data-startups-will-kill-this-30-billion-industry-2012-8How Big Data Startups Could Kill A $30 Billion Industryhttp://www.businessinsider.com/how-new-big-data-startups-will-kill-this-30-billion-industry-2012-8
Tue, 14 Aug 2012 18:14:00 -0400Julie Bort
<p><img style="float:right;" src="http://static1.businessinsider.com/image/502ab63feab8ead630000000/ravi-mhatre-lightspeed-ventures.jpg" border="0" alt="Ravi Mhatre Lightspeed Ventures" /></p><p>When it comes to big data, "size doesn't matter," Ravi Mhatre, managing director of venture firm Lightspeed <a href="http://www.businessinsider.com/blackboard/venture-partners" class="hidden_link">Venture Partners</a> just told <a href="http://www.businessinsider.com/blackboard/business-insider" class="hidden_link">Business Insider</a>.</p>
<p>"It's not just big data. It's got to be fast data and it's got to be meaningful data" he says.</p>
<p>There's a new wave of startups trying to make it easier to use big data systems. If they succeed, they will really hurt the multibillion-dollar market for business-intelligence software and threaten products like SAP's Business Objects, <a href="http://www.businessinsider.com/blackboard/ibm" class="hidden_link">IBM</a> Cognos and <a href="http://www.businessinsider.com/blackboard/oracle" class="hidden_link">Oracle</a> Hyperion.</p>
<p>"We're talking an industry today that's probably $20 [billion] to $30 billion that I think, overnight, is going to be replaced by a completely new set of platforms," he predicts.</p>
<p>Big data apps like <a href="http://www.businessinsider.com/category/hadoop">Hadoop</a> allow companies to store humongous amounts of data on inexpensive servers and storage. As they store more data, it leads to two problems: 1) you can't easily turn all that data into charts 2) it can take a long time&mdash;minutes&mdash;to get results when you ask a question, run a query.</p>
<p>For instance, your Hadoop system could store info on every item ever sold by your company. If you wanted to find out what time of day, each month, you sold the most items, you couldn't output all that into a spreadsheet and start running charts. It could be 10 million rows of stuff.</p>
<p>Mhatre says he's funded a startup, still in stealth mode, working on tech that will take those 10 million rows and turn them into pictures. "Not so much charts, but other ways a human can visually look at large amounts of data," he explains.</p>
<p>He didn't name his stealth startup but another example of a big-data startup is <a href="http://www.platfora.com/">Platfora</a>, funded by <a href="http://www.businessinsider.com/blackboard/andreessen-horowitz" class="hidden_link">Andreessen Horowitz</a>, <a href="http://www.businessinsider.com/blackboard/sutter-hill-ventures" class="hidden_link">Sutter Hill Ventures</a>, and the CIA's investment arm, <a href="http://www.businessinsider.com/blackboard/in-q-tel" class="hidden_link">In-Q-Tel</a>.</p>
<p>Mhatre's funding other startups that will speed up Hadoop and other big-data technologies. This includes a company called <a href="http://www.qubole.com/">Qubole</a> with a product in beta. Qubole was cofounded by two guys who used to run Facebook's infrastructure, Ashish Thusoo and Joydeep Sen Sarma.</p>
<p><strong>Don't miss:&nbsp;<a href="http://www.businessinsider.com/big-data-is-the-hottest-thing-to-hit-the-web-in-years-heres-why-2012-2">Big Data Is The Hottest Thing To Hit The Web In Years: Here's Why</a></strong></p><p><a href="http://www.businessinsider.com/how-new-big-data-startups-will-kill-this-30-billion-industry-2012-8#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/5-years-ago-the-iphone-changed-everything-2012-65 Years Ago, the iPhone Changed Everythinghttp://www.businessinsider.com/5-years-ago-the-iphone-changed-everything-2012-6
Fri, 29 Jun 2012 18:02:00 -0400Justin Caldbeck
<p>While it almost seems hard to believe, it was just five years ago today that the first iPhones were sold.&nbsp; I remember the enormous amount of people lined up outside of <a class="hidden_link" href="http://www.businessinsider.com/blackboard/apple">Apple</a> Stores eagerly waiting for their new device.&nbsp; It was easy to understand the hype of the device, but want many did not predict would be the way it would shape our behaviors and give birth to an entire industry.</p>
<p>The <a class="hidden_link" href="http://www.businessinsider.com/blackboard/iphone">iPhone</a> itself is a game changer, few could deny that, but much like <a class="hidden_link" href="http://www.businessinsider.com/blackboard/itunes">iTunes</a> was the real power behind the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/ipod">iPod</a>, the App Store has been the big game changer for our industry.</p>
<p>We didn&rsquo;t all immediate realize the power of the App Store, in fact my partners wrote an interesting post in 2009 about how little revenue Apple was making from apps.&nbsp; But today, we have seen companies emerge as App providers and other that have started as popular Apps and then expand to other platforms.&nbsp; <a class="hidden_link" href="http://www.businessinsider.com/blackboard/rovio">Rovio</a>, makers of <a class="hidden_link" href="http://www.businessinsider.com/blackboard/angry-birds">Angry Birds</a>, Pulse* <a class="hidden_link" href="http://www.businessinsider.com/blackboard/instagram">Instagram</a>, <a class="hidden_link" href="http://www.businessinsider.com/blackboard/uber">Uber</a> and <a class="hidden_link" href="http://www.businessinsider.com/blackboard/foursquare">Foursquare</a> are just a few examples of companies that have seen incredible success as mobile apps.</p>
<p>In addition, the iPhone has played a big role in reducing the friction for consumers to use products from businesses that were previously web-centric such as TaskRabbit*, LivingSocial* and GrubHub* as well as retailers like Gilt.&nbsp; These companies not only built better customer engagement through the iPhone but also attracted new users who discovered the brand for the first time on a mobile device.&nbsp;</p>
<p>Despite all of these early successes, the market is still in its infancy in many ways.&nbsp; While it may seem that everyone we know has an iPhone or <a class="hidden_link" href="http://www.businessinsider.com/blackboard/android">Android</a> device, Nielson recently reported that only about 50 percent of US consumers have a smartphone today.&nbsp; As that number grows, the audience and demand for new applications and types of mobile solutions will grow too.&nbsp;</p>
<p>For my part, I feel fortune to have the opportunity to watch the market emerge and evolve and help companies take advantage of this amazing platform.</p>
<p><em>*Lightspeed portfolio companies</em></p>
<p>&nbsp;</p>
<p><br /> <a href="http://feeds.wordpress.com/1.0/gocomments/lsvp.wordpress.com/1850/"></a> <a href="http://feeds.wordpress.com/1.0/godelicious/lsvp.wordpress.com/1850/"></a> <a href="http://feeds.wordpress.com/1.0/gofacebook/lsvp.wordpress.com/1850/"></a> <a href="http://feeds.wordpress.com/1.0/gotwitter/lsvp.wordpress.com/1850/"></a> <a href="http://feeds.wordpress.com/1.0/gostumble/lsvp.wordpress.com/1850/"></a> <a href="http://feeds.wordpress.com/1.0/godigg/lsvp.wordpress.com/1850/"></a> <a href="http://feeds.wordpress.com/1.0/goreddit/lsvp.wordpress.com/1850/"></a></p>
<p><strong>Read more posts on <a href="http://lsvp.wordpress.com/">Lightspeed Venture Partners Blog &raquo;</a></strong></p><p><a href="http://www.businessinsider.com/5-years-ago-the-iphone-changed-everything-2012-6#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/enterprise-infrastructure--what-we-are-working-on-at-lightspeed-in-2011-2011-2Enterprise Infrastructure – What We Are Working On At Lightspeed In 2011http://www.businessinsider.com/enterprise-infrastructure--what-we-are-working-on-at-lightspeed-in-2011-2011-2
Tue, 08 Feb 2011 20:03:00 -0500John Vrionis
<p>We continue to be very enthusiastic about the tremendous amount of opportunity in the Enterprise Infrastructure sector for 2011. In the past few years, we&rsquo;ve seen significant innovation in technologies such as virtualization, flash memory and distributed databases and applications. When combined with business model shifts (cloud computing) and strong macroeconomic forces (reduced R&amp;D budgets), a &ldquo;perfect storm&rdquo; is created where the IT ecosystem becomes ripe for disruption.</p>
<p>Startups can take advantage of the changing seas and ride the subsequent waves to emerge as leaders in new categories. For this post, I&rsquo;ll highlight three categories where I believe we&rsquo;ll see significant enterprise adoption in 2011 &ndash; big data solutions, use cases for cloud and virtualizing the network. Startups in these categories are now at the point where ideas have become stable products and science experiments have transformed into solutions.</p>
<p>1. BIG DATA SOLUTIONS GROW UP</p>
<p>There&rsquo;s been a lot of &ldquo;big noise&rdquo; about &ldquo;Big Data&rdquo; for the past couple of years but, there has been &ldquo;little&rdquo; clarity for the traditional Enterprise customer. Hadoop, Map Reduce, Cassandra, NoSQL &ndash; all interesting ideas, but what Enterprise IT needs is solutions. Solutions come when there are products optimized to solve the challenges with specific applications. Most of the exciting, fast growing technology companies we hear about daily (Facebook, Zynga, Twitter, Groupon, LinkedIn, Google, etc) are incredibly efficient data-centric businesses. These companies collect, analyze and leverage massive amounts of data and use it as a fundamental competitive weapon. In terms of really working with &ldquo;Big Data,&rdquo; Google started it. Larry and Serge taught the world that analyzing more information generates better results than any algorithm. These high-profile web companies created technologies to solve problems other companies had not faced before. In this copycat world we live in, Enterprise IT is ready to follow the consumer-tech leaders. The best enterprise companies are working hard to leverage vast amounts of data in order to make better decisions and deliver better products. At Lightspeed, we invested in companies like Riptano (www.datastax.com) and MapR Technologies (www.maprtech.com) because these are startups building solutions that enable Enterprise IT to work with promising Big Data platforms like Cassandra and Hadoop. With enterprise-grade solutions now available, I expect 2011 to be a year when tinkering leaps to full-scale engagement because these new platforms will deliver a meaningful advantage to Enterprise customers.</p>
<p>2. CLOUD COMPUTING FINDS ITS ENTERPRISE USE CASES</p>
<p>The hype around &ldquo;Cloud Computing&rdquo; is officially everywhere. My mom, who is in her sixties (sorry Mom) and just learned to text, recently asked me about Cloud Computing. Apparently she&rsquo;s seen the commercials. In Enterprise IT circles and VC offices, there&rsquo;s a lot of discussion around &ldquo;Public&rdquo; clouds vs. &ldquo;Private&rdquo; clouds; Infrastructure as a Service vs. Platforms as a Service; and the pros and cons of each. It&rsquo;s all valuable theoretical debate, but people need to focus on the use cases and the specific economics of a particular &ldquo;cloud&rdquo; or platform configuration. As of right now, not every Enterprise IT use case fits the cloud model. In fact, most don&rsquo;t. But there are three in particular that definitely do &mdash; application management, network and systems management and tier 2 and 3 storage. At Lightspeed, we&rsquo;ve invested in a number of companies such as AppDynamics (www.appdynamics.com), Cirtas (www.cirtas.com), and Fast_IP which deliver solutions that are designed from the ground up to enable enterprise class customers to leverage the fundamental advantages of &ldquo;Cloud Computing&rdquo; &ndash; agility, leveraged resources, and a flexible cost model. Highly dynamic, distributed applications are being developed at an accelerating rate and represent an ideal use case for cloud environments when coupled with a solution like the one offered by AppDynamics which drives resource utilization based on application level demands. Similarly, Enterprise IT storage buyers have gotten smarter about tiering data among various levels of storage media, and infrequently accessed data is a great fit for cloud storage. Cloud controllers like the one offered by Cirtas enable enterprises to have the performance, security and reliability they are used to with traditional internal solutions but leverage the economics of the cloud.</p>
<p>3. VIRTUALIZING THE NETWORK</p>
<p>To date, the story of virtualization has been primarily about servers and storage. Tremendous innovation from VMware led the way for an entirely new set of companies to emerge in the data center infrastructure ecosystem. At Lightspeed, we talk about the fundamental pillars of the data center as application and systems management, servers, storage, and networking. Given all the advancement and activity around the first three, I think it&rsquo;s about time the network caught up. As Enterprise IT continues to virtualize more of the data center and adopts cloud computing models (public or private), the network fundamentals are being forced to evolve as well. Networking solutions that decouple hardware from software are better aligned with the data center of the future. Companies such as Embrane (www.embrane.com) and Nicira Networks (www.nicira.com) are tackling this challenge head on and I believe 2011 will be the year where this fundamental segment of data center infrastructure starts to see meaningful momentum.</p><p><a href="http://www.businessinsider.com/enterprise-infrastructure--what-we-are-working-on-at-lightspeed-in-2011-2011-2#comments">Join the conversation about this story &#187;</a></p>